Virgin flies higher than Qantas

Virgin Australia has so far withstood the domestic capacity war better than its larger rival Qantas, with traffic statistics for July and August showing an increase in both passenger numbers and airfares from the previous year.

In the first two months of fiscal 2013, Virgin carried 55,000 more passengers within Australia and an extra 20,000 passengers on international flights. While capacity growth outstripped the increase in passenger numbers, meaning aircraft flew with more empty seats, Virgin said average airfares increased at both divisions.

Virgin has been increasing frequencies on business routes and deploying wide-body aircraft on flights from Sydney and Melbourne to Perth in a bid to lure more corporate travellers from Qantas.

Qantas has responded with aggressive capacity additions on both full service and budget sectors.

Virgin’s capacity grew 9.3 per cent over the two-month period – ahead of guidance for a first increase of between 8 and 9 per cent – with the airline having taken delivery of two to three new aircraft a month for much of calendar 2012. The new aircraft are a mix of a stretched version of the single-aisle Boeing 737 and the wide-body Airbus A330. Virgin has taken delivery of five out of the eight A330s on order.

For July, Qantas said it lost 40,000 domestic passengers, despite adding more seats and offering discounts to spur travellers. The percentage of full seats on Qantas domestic and international flights also fell over the month, with a similar decline on local flights at Jetstar.

Virgin said its yields, or average airfares, had increased in the period, but did not provide details.

“Part of this growth that’s going on has been them improving frequencies and adding wide bodies on east-west routes - an important route that they were underdone on,” said one aviation analyst.

“Capacity growth at 9 per cent is big, but as Virgin start to attract corporate customers they need to have extra room on board. Traditionally, Virgin has had higher load factors but the drop there is part and parcel of extra capacity washing through the system.”

Passengers loads fell to 75.7 per cent from 78.1 per cent a year earlier, the company said.

The company has argued that the weaker loads are a reflection of the strategy to chase more high-yielding corporate customers rather than discount to fill seats at the leisure end. Even so, analysts have said Virgin will have a tough time maintaining yield growth if the capacity war continues into the second half of 2013.